REPORT: China Has Cut Reserve Ratio For Some Financial Institutions

china red parade

Photo: kangster on flickr

Bloomberg (via the terminal) is reporting that China has cut reserve ratio for some county level banks. This comes from a SINA report that doesn’t cite any sources.Earlier today China reported Q1 GDP of 8.1 per cent, against expectations of 8.4 per cent growth. GDP declined from 8.9 per cent the previous quarter.

Investors and analysts have speculated that a slowdown in Chinese growth could see Beijing loosen its monetary policy.

Bloomberg’s Linda Yeuh said China made a similar more before its last reserve requirement ratio cut. So this could be a good sign for markets.

But China bear Gary Shilling has been very critical of such moves dubbing them ‘caveman tactics’. At a Bloomberg Link conference earlier this year, he said Beijing targets reserve ratios because they focus on credit allocation which cuts off lending. Higher interest rates usually see the best users of credit continue to borrow.

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